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Will judge's Canwest decision save the National Post?

By David FriendTHE CANADIAN PRESS

Fri., Oct. 30, 2009

An Ontario judge has allowed Canwest Global Communications to move its money-losing National Post into the division that runs its other papers, which Canwest says is its best hope of saving the newspaper.

Justice Sarah Pepall, who is overseeing Canwest's restructuring, allowed the move of the newspaper into the Canwest Limited Partnership after the company and its creditors reached a deal on the transaction earlier this week.

Canwest Global Communications Corp. is seeking creditor protection for some of its business units. A woman is seen leaving the National Post building on Tuesday, Oct. 6, 2009. (CARLOS OSARIO / TORONTO STAR)

Canwest Limited Partnership is not among divisions of the company operating under court protection from creditors.

A lawyer for Canwest emphasized the urgency of the decision, saying that not only would the move allow the National Post to keep operating, it was essential to a successful restructuring of the whole company.

"The business of the National Post and the LP entities (other Canwest newspapers and media outlets) are highly integrated and interdependent," said Lyndon Barnes.

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"Without these agreements, the ability to restructure either of these entities is in doubt."

Barnes told the court that the National Post was also valuable to the rest of Canwest's newspaper assets, partly because each relies on the other for various operations, including news content and ultimately saves money for the smaller newspapers.

"They're inseparable," he said.

A number of divisions of Canwest, including the National Post Co., are restructuring under court protection from creditors.

On Friday, the court heard details about the struggle to find a buyer for the National Post. A lawyer for the monitor overseeing the process said despite widespread knowledge that the Post was for sale, RBC Dominion Securities couldn't find any interested buyers.

Another study found that shutting down the Post and liquidating its assets would cost Canwest more than the company would make back.

In court documents filed this week, Canwest said the Post has racked up $62.4 million in losses over the past four years before factoring in interest, taxes, depreciation and amortization. It also owes $139.1 million to Canwest Media, its holding company, because it helped the company with payroll, capital expenditures and operational losses.

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Chief financial officer John Maguire said in the filing that if the Post's Toronto operations had shut down, the company would have lost an integral part of its news team and been forced to pay about $500,000 a year to create or license Toronto-based news content. The Post is also expected to spend $11.6 million on printing and distribution services from other units of Canwest in 2010, he added.

After the decision on Friday, the Post's chief executive Paul Godfrey told The Canadian Press he believed the newspaper was headed towards a brighter future.

"Without getting into actual figures, I've seen a remarkable improvement in the bottom line of the Post in the last year," he said.

"I believe that profitability is not that far away."

Canwest typically doesn't separate the earnings of the Post from other newspaper assets.

Company spokesman John Douglas said the decision proves that talk of the newspaper's demise has been greatly exaggerated.

"We know that the National Post is going to be a positive contributor to the publishing group, and we know that the publishing group will be stronger with it," he said.

Reports have suggested that once all of the newspaper assets are under the same division, Canwest will file for creditor protection in that publishing division as well, ultimately preparing those assets for a sale.

Canwest refuses to comment on whether a sale is in the works, and has only said that it's in talks for an "orderly restructuring of the business."

About 277 people work at the National Post, which was founded in 1998 by a the Southam group led by disgraced businessman Conrad Black.

Canwest has been working to pay down $4 billion of debt that mounted after buying Black's newspaper assets and the specialty channels owned by Alliance Atlantis.

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